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Old 05-11-2021, 12:41 PM   #41
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I think this depends on the source of the withdrawals. This may work if withdrawals come from IRA accounts. However we are living off our taxable brokerage account and I was told by lenders that regular withdrawals from that don’t count.
You might try Penfed Credit Union. They were the ones who told me they went by income on taxes. I think this is because they fund their own loans and don't plan to sell to Fannie May or Freddie Mac. They said if we used asset depletion we had to show enough assets to cover 30 years of payments, which I took to mean they planned to hang on to the loans for 30 years. The other lenders I talked to said we only needed to show 3 years.

Fannie May and Freddie Mac are the ones with the retirement account and 3 years of assets rules. According to the WSJ, they support about half the mortgage loans in the country, so you'd have to find a lender who doesn't follow the Fannie May and Freddie Mac rules for qualifying.

Side note: Showing three years of assets for a 30 year loan to a retiree with no employment income? On what planet does that make any sense?
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Old 05-11-2021, 12:47 PM   #42
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If we were to start up a 72T (at age 50), would that show income for a loan? Would banks buy that?

I think it does make a lot of sense to get a loan at 3% during this time period....a great inflation hedge. I would probably refi the house we are building. Right now we paid cash for the lot and have paid cash for all of the building materials. I could use the 72T as income for ACA too and just live off the refi loan.
You'd have to check with a lender, but it seems like it would under these Fannie May rules - https://selling-guide.fanniemae.com/...ing-income.htm

"We offer two options for a borrower to use this asset to qualify as income. The lender 1) must document regular receipt of the income in the form of a distribution from a 401(k), IRA, or Keogh retirement account, as well as, confirm that it will continue for at least three years; or 2) may create an income stream using eligible "employment-related assets" when a distribution is not already set up or the distribution amount is not enough to qualify."
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Old 05-11-2021, 01:42 PM   #43
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Finally a bank said show us your taxes for 3 years. Turns out we'd converted a bunch of 401(k) money to ROTHs. THAT was our salvation. Even though we actually had LESS total assets (after all, we had to pay taxes on the conversions) the conversion gave us "income" on our 1040 and the bank was happy with that. That was another reason we were low on non-qualified cash or assets. We'd spent a fair amount on taxes over the 3 years for the conversions. Total balderdash thinking on the part of the bank in my opinion but it got us our loan. Who knew? YMMV

That Roth Conversion idea may come in handy for us if we ever need to borrow. I have a 780 Credit Score, but only have one credit card, but plenty of assets. I was declined when I applied for an Amazon Credit Card. They said I didn't have enough credit cards! I could have my wife cosign for me, she has several credit cards.
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Old 05-11-2021, 02:48 PM   #44
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If you have a healthy retirement account or investment account your brokerage firm may offer you a low cost loan using your investments as collateral. I did this to buy and renovate our new home before selling our existing one. 500+K. No points, no fees just straight interest for 1-3 years at about 2%. Was going to otherwise sell investments returning 8% or thereabouts.
Which broker gives you a 2% portfolio loan? I've seen mention of Interactive Brokers but didn't think they were that cheap, Schwab is a little less than 3%.

EDIT: to answer my own question, a $200k margin loan from IB is currently a little over 1.3% (for a Pro account, otherwise about 2.6%), at Schwab a pledged asset loan a little less than 2.4% (if you pledge $1mil+ of nonretirement assets). Schwab will loan up to 70% of portfolio value with a min draw of $70k, margin loans are up to 50% of value. No way would I do anywhere near that percentage to avoid risk of margin calls.

I think IB is mainly for experienced investors that trade actively, not the typical folks here. Would still like to know which broker you used.
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Old 05-11-2021, 03:14 PM   #45
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It seems like they give you a loan on your existing investments to buy more stocks, not to buy a house or use for anything else. What am I missing here?
Margin loans can be used for any purpose, not just equities.
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Old 05-11-2021, 03:26 PM   #46
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Margin loans can be used for any purpose, not just equities.
I agree, I used one years ago to buy a car. Then the funniest thing was the remaining securities rose in value so fast the within a year the car was paid off when I sold some of the securities.
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Old 05-11-2021, 03:27 PM   #47
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Originally Posted by Fermion View Post
If we were to start up a 72T (at age 50), would that show income for a loan? Would banks buy that?

I think it does make a lot of sense to get a loan at 3% during this time period....a great inflation hedge. I would probably refi the house we are building. Right now we paid cash for the lot and have paid cash for all of the building materials. I could use the 72T as income for ACA too and just live off the refi loan.
I have no idea if they WOULD see that as income, but in essence, that's what we did when we converted tIRAs (starting with 401(k)s actually) to ROTHs. They were "income" on the 1040 'cause we hadda pay taxes on them and that was ALL the banks cared about. Made no difference to them that we were (in effect) spending some of our numerical capital. You'd think that would be a "bad" thing. But the banks have their own little formulae. If you "satisfy" their formula, you're golden. "Income is income" if it's on your 1040 the nice young lady said to us - "You qualify!" Surprised the shazbot out of me but YMMV.
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Old 05-11-2021, 03:57 PM   #48
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Which broker gives you a 2% portfolio loan? I've seen mention of Interactive Brokers but didn't think they were that cheap, Schwab is a little less than 3%.

EDIT: to answer my own question, a $200k margin loan from IB is currently a little over 1.3% (for a Pro account, otherwise about 2.6%), at Schwab a pledged asset loan a little less than 2.4% (if you pledge $1mil+ of nonretirement assets). Schwab will loan up to 70% of portfolio value with a min draw of $70k, margin loans are up to 50% of value. No way would I do anywhere near that percentage to avoid risk of margin calls.

I think IB is mainly for experienced investors that trade actively, not the typical folks here. Would still like to know which broker you used.

I just put a bunch of Mutual funds and Exchange traded funds into IB. My daughter is buying a foreclosed house with an FHA loan, however the house is being made to jump through hoops and the first loan was close to closing and an inspector said it had a structural issue. That stopped the first loan process just weeks before closing. Then they had to start all over. So now they will most likely be in a position were the get a charge for every day past a certain date. Anyway, if it all falls through I should be able to borrow at good rate against the funds I deposited in IB and give them a loan until they get a mortgage.
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Old 05-14-2021, 03:41 PM   #49
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I refinanced in January, saving $550 a month. I had a solar loan I combined with my primary loan and dripped from 4.75% to 2.75%. I am on a disabled retirement and the lender wanted me to have what I took out of my IRAs last year show as a monthly income this year. That was easier than documenting I had income from a renter in the spare bedroom. I had to set up a monthly distribution from Vanguard. As soon as I got the loan, I cancelled the auto distribution.easy peasy
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Old 05-14-2021, 04:37 PM   #50
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Retired in January 2016. Got a new mortgage in March of that year to move into house in another state. In August of 2018 got another mortgage to move back to original state. March of this year got construction loan that will be rolled into a new mortgage when my house in another new state gets completed next year.
All of my retirement assets are in a 401 k from my last employer. Have never taken regular withdrawals since we use the equity from sold homes to live on. Haven’t had a problem getting any loans for any of these mortgages. The construction loan was a little more paperwork intensive ( very little). Have used a heloc in the past but they were discontinued at this lender a few years back so can’t speak to those.
Wife (retired a year before me) and I have good credit and we are both 61 years young.
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Old 05-14-2021, 07:18 PM   #51
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I don't mean to sound snooty, but here's what came to my mind when reading the title of this thread.

I'm in my 12th year of retirement, and like every other retired person here I am sitting on a substantial nest egg that allowed me to retire, along with a paid off home and car.

The thought of even applying for a loan in retirement seems wacky to me from my vantage point. If I wanted to borrow money (which I don't), I suppose that I'd borrow it from myself.
Don't worry; you don't sound snooty.

I'm looking at retiring early next year. I have enough saved up to continue my current lifestyle longer than I'll live. That does not include the equity in my house, which is almost paid off. I'm looking at moving to another state. I'd rather take out a mortgage on the new house, and when I sell mine add that equity to my investments - that way I can grow that money and make more on it than I would having it tied up in a non-liquid asset.
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Old 05-14-2021, 07:46 PM   #52
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We had no difficulty refinancing our small mortgage earlier this spring, as we qualified on my pension alone. Once the bank saw that, they showed no interest in reviewing our retirement account draws.
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Old 05-15-2021, 10:42 AM   #53
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I bought a truck through Ford credit. The salesman talked me into it - I wanted to pay cash, but they offered another $1k off if I went Ford credit.

The credit app asked for sources of income. I have no pension, and this was before I started taking ss, and my non-ira dividends/interest are minimal, so I listed $0 for income.

The salesman said that $0 would be a deal breaker and asked about DW. She has a pension, so I added her as a co-signor and I got the truck loan. I don't remember the credit app having a section on assets - I only remember the income part.
I consider the monthly transfers from my savings and investment accounts to be income. Plus Iíve been with the CU for 20 years with a steady deposit history over that entire time. If asked about income I just list employer as retired and income as the sum of my transfers. Never been an issue with the CU or CC companies especially with a credit score north of 800.
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Old 05-15-2021, 10:49 AM   #54
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+1 This is exactly my experience having just closed on a $200,000 refi after retiring. And don't think you can just show last year's 1040 or that you can retire during the process. they check with your "current" employer multiple times right up to the closing date. And yes, closing out a zeroed out HELOC will likely be required, and if you haven't had it opened for long it may cost you to close it. There's something called subordination of the HELOC that you can try, but that will add to your closing costs too.

+2 I previously quit my job in 2003 and had almost $1million in assets but could only get a loan for about $75k to buy a house. it was based on my various income streams that were pretty low. I ended up buying 3 houses with cash! Yes, it makes absolutely no sense at all.
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Old 05-15-2021, 12:25 PM   #55
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I consider the monthly transfers from my savings and investment accounts to be income. Plus Iíve been with the CU for 20 years with a steady deposit history over that entire time. If asked about income I just list employer as retired and income as the sum of my transfers. Never been an issue with the CU or CC companies especially with a credit score north of 800.

Does your CU require loans to follow Fannie Mae and Freddie Mac rules for qualifying? Or do they just hang on to the loans themselves? If they don't intend to sell the loans they can have their own requirements.
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Old 05-15-2021, 12:33 PM   #56
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.... Finally a bank said show us your taxes for 3 years. Turns out we'd converted a bunch of 401(k) money to ROTHs. THAT was our salvation. Even though we actually had LESS total assets (after all, we had to pay taxes on the conversions) the conversion gave us "income" on our 1040 and the bank was happy with that. That was another reason we were low on non-qualified cash or assets. We'd spent a fair amount on taxes over the 3 years for the conversions. Total balderdash thinking on the part of the bank in my opinion but it got us our loan. Who knew? YMMV
While I know banks do this and I suspect because it results in "income" that is shown on a tax return so under whatever rules are written it allows them to count it.... at the same time is it silly... Roth conversions are just moving money from one pocket to another pocket if done tax free... but in most cases is it also paying money out of a third pocket.

I've also heard that you can set up an automatic monthly tax-deferred account withdrawal for whateve income you need about 6 months before you get the loan and then kill it a few months after the loan is funded.
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Old 05-15-2021, 12:46 PM   #57
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While I know banks do this and I suspect because it results in "income" that is shown on a tax return so under whatever rules are written it allows them to count it.... at the same time is it silly... Roth conversions are just moving money from one pocket to another pocket if done tax free... but in most cases is it also paying money out of a third pocket.

I've also heard that you can set up an automatic monthly tax-deferred account withdrawal for whateve income you need about 6 months before you get the loan and then kill it a few months after the loan is funded.
Yeah, I completely agree that it's silly. How could a bank think that LOWERING ones assets should qualify for a loan? JUST before this idea occurred to the nice young lady "helping" us, I'd had enough and had to step outside the bank to cool down (it was 68 degrees inside and 85 outside - you figure it out.) So, I walked around the block, thinking, and then returned. THERE on the FRONT DOOR of the bank was this BIG SIGN.

BAD CREDIT, NO CREDIT - WE CAN HELP!

Dirty, miserable, rotten, racherfraching double clutchers!! I WAS hot. I stormed back into the bank and was just ready to call the lady some choice names when she suggested the 1040 "scheme." So DW and I left to dig out the forms. That was the beginning of our "salvation." Honestly, I lost all faith in the banking system at that point. But we did get the loan, so YMMV.
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Old 05-15-2021, 06:39 PM   #58
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For mortgages You need to show a history of income (last 2 years) and need to have automated withdrawals from IRA to make it look like a pension. They donít trust you to make withdrawals on your own.
Even if you have 800 credit score.
Car loans just need a good credit score.
That's exactly how we got our mortgage in 2015. We were both retired with no steady monthly income (just lumpy withdrawals) but substantial savings. I talked to lenders for almost 2 years who all said, "No monthly income, no mortgage" before I found one (a Costco referral, best mortgage guy ever!) who advised us we just needed an auto withdrawal from our investments to support the loan amount we wanted. So easy! The VA loan closed in 5 weeks and we stopped the auto withdrawals from Schwab immediately after the loan closed.

We had to provide 2 years of tax returns but I think we had only 2 auto withdrawals before we got approved for the mortgage. Neither one of us had worked since 2011.
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Old 05-15-2021, 11:21 PM   #59
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I scanned all the comments, so if I'm repeating someone I apologize.

OP, if you like your current HELOC and both lenders are amenable, you can look into resubordinating it to your new mortgage. Your new mortgage wants to be in first lending position on your house, and resubordination is some paperwork where your existing HELOC agrees to let your new mortgage have first position.

It seems easier to me than canceling the existing HELOC and applying for another one, but YMMV.

Also, on the W2R stuff, W2R was talking about applying for a new loan in retirement. Some of the responses were talking about carrying an existing loan into retirement. Two different things.

I've been FIREd 5 years and simply haven't had any large expenses. But my plan is sort of like W2R's - if I want something I'll just buy it with my own money. I can understand and agree that there can be situations where taxes are better if the cash flow is evened out, though, so maybe with large expenses it would make sense.
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Old 05-16-2021, 07:17 AM   #60
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Interesting discussion. Currently DW is FIREd and I"m "semi-FIREd" (self-employed but self-limited to 200 hours/year). We opened a HELOC about a year before FIRE so that we'd have access to cash. We did borrow a few thousand on it once just to make sure it worked ok, and set up automatic repayments to see that worked ok too...all went well.

But we are in a situation like some have described, where most of our NW is in tax-deferred accounts. And if we move and buy a new home, we may need bridge money until we sell the current home...the HELOC hopefully will help with this.

We are taking irregular withdrawals from wife's TIRA (she's past 59 1/2, I'm not), so I guess we could set that up on regular payments...but we're still trying to manage the ACA cliff (notwithstanding the exception for this year and next), so we'd prefer not to do that quite yet.

I'll stay tuned to see what happens with the OP on this one.
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